New Home Sales Rise Despite Higher Costs

home builder on frame of house

More new homes are selling throughout the United States, even as affordability concerns persist.

Sales of newly built, single-family homes rose 3.5 percent in August to a seasonally adjusted annual rate of 629,000 units after downwardly revised reports from June and July, according to recent data from the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau. According to a press release from the National Association of Home Builders (NAHB), these downwardly revised reports suggest softness in new home sales activity this summer. Nevertheless, on a year-to-date basis, new home sales are 6.9 percent above where they were at this time last year.

“New home sales have ticked up in August, due to positive demographics and a strong overall economy,” said Randy Noel, NAHB chairman and a custom home builder from LaPlace, La. “However, housing affordability remains a serious concern and builders must manage supply-side costs and stiff regulatory hurdles to keep prices competitive.”

“Housing affordability has taken a toll on new home sales over the summer, and there could be market volatility in the months ahead as communities grapple with the aftereffects of Hurricane Florence,” said Robert Dietz, NAHB chief economist. “Still, we expect the overall housing market to grow this year as demand continues to increase among millennials and other newcomers.”

In the real estate and housing industry, a new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: yet to be started, under construction or complete. In addition to adjusting for seasonal effects, the August reading of 629,000 units is the number of homes that would sell if this pace continued through the next 12 months, NAHB stated.
The inventory of newly-built homes for sale was 318,000 in August. The median sales price was $320,200.

Regionally, new home sales increased 47.8 percent in the Northeast, 9.1 percent in the West and 2.7 percent in the Midwest. The South saw new home sales fall 1.7 percent.

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